Alternative Investments: 3 options to obtain large profitabilities
Despite the fact that more and more people are talking about alternative investments lately, there continues to be great lack of knowledge about what their meaning truly is. The word “alternative,” on occasion, brings a touch of uncertainty and distrust that causes a certain aversion toward this type of investments. However, and even given this general lack of knowledge on the part of many savers, some alternative investment are becoming increasingly popular and have been growing enormously in recent years.
Nevertheless, there are still investors who think that alternative investments are aimed at a very particular part of the public under specific rules. Do you belong to this group?
If so, we advise that you continue reading to clarify all your possible doubts and open a wide range of attractive possibilities of alternative investments.
Alternative Investment: A different way to obtain profitability
The majority of alternative investments have made their presence in markets with the arrival of new technologies, without which many of them would not be possible.
Until recently, the ways to obtain profitability through investments were limited to traditional financial instruments: stocks, bonds and promissory notes, investment funds of fixed and variable income, deposits and positions in currencies.
Many of these operations were reserved exclusively for professional or institutional investors, leaving small investors outside the circle.
What are investment alternatives?
Alternative investments are those that focus on assets other than those traditionally known in the market such as stocks, bonds, and deposits. In other words, they are materialized in other types of assets classified as “alternative.” They form a wide range of possibilities that includes assets in:
Infrastructure (Real Estate Crowdfunding, Equity Crowdfunding)Raw Material (Venture Capital)Investments through loans (Crowdlending)Etc...
• Real Estate Crowdfunding
• Investment in startups or in the capital of companies that are not listed on the Stock Exchange (Equity Crowdfunding).
• Lend money through crowdfunding platforms (Crowdlending)
• Investment in loans already issued by loan originators.
• NFTs (Non Fungible Tokens)
• Crypto currency
In the current situation of the financial markets, characterized by a fall in the profitability of fixed income (rates close to zero), the risk of rising interest rates, and the high price of variable income with respect to their valuations and their volatility, alternative investments have taken on significant relevance among investors who seek to diversify their portfolios.
How do alternative investments work?
In the next paragraphs we will detail some of the alternative investment options with a high demand currently. However, if you are thinking of introducing yourself into this new sector full of opportunities, first you must have clarity about certain aspects, which we begin by dismantling some of the myths about this type of investments:
Alternative investments imply a greater risk.
The profitability and the total risk of the investment, whether alternative or traditional, are two variables that are directly related. Therefore, the greater the risk assumed in a position in our portfolio, the greater the expected profitability (in the case of variable income or hedge funds). This is reversed in the case of fixed income over issuers with a high credit rating. Of course, it should be stressed that there are no types of investments that are free of risk.
Starting from the previous premise and focusing on the case of alternative investments, the scenario is the same. We will be able to find alternative investment options with reduced risk and low expected return and the opposite option.
However, there is the case of alternative investments such as Crowdfunding and CrowdLending, especially real estate, which usually offer greater security and confidence to the investor, something that many times turns them into more attractive options than other more profitable operations that also entail a higher risk.
Alternative investments are accessible to all the world.
There are alternative investments that are more and less accessible, in reference to the type of public that can undertake them. Although in general a wide range of alternative investments are open to all types of investor profiles, there do exist some that are exclusively reserved for institutional investors, regulated by law.
Alternative investments have a potential lack of liquidity.
There are more and less liquid alternative investments. Therefore, we must choose those options that are more adapted to our investor profile (that is to say, our eventual need to materialize the investment into money) and particular preferences.
Now that these points are clarified, we will review some of the most attractive investment possibilities that are succeeding in the current international markets.
What alternatives of investment are there currently?
As we have already mentioned in previous paragraphs, a growing number of alternative investments are emerging as a means to manage the profitability and diversify the risk of portfolios. They take place through financial instruments that do not respond to the classics and form a wide range of possibilities for all types of investor profiles.
3 Highly Profitable Alternative Investments
Crowdlending is a trend derived from the Crowdfunding culture (collective financing) that consists of the creation of a market for access to alternative credit from a traditional bank loan.
It is linked to new technologies, since all the arrangements are carried out online on different platforms created for this use.
Crowdfunding has been, without doubt, an innovative alternative for savers from around the world to deposit their capital in these projects in exchange for returns that financial institutions cannot provide.
If we decide, therefore, to invest in a project financed through Crowdlending, we will be, on one hand, contributing to the launch and development of this modality of financing, and on the other hand, obtaining an appealing return on our capital.
Can an investment in Crowdlending be considered liquid?
Yes, since when we decide to participate, what we do is acquire a part of the debt necessary to carry out the project in question. If at some point we need to recover our capital and retire the investment, there is a secondary market where we can sell our participation in the project, recovering the liquid cash.
In general, when an amount of money is invested in Crowdlending, the risk is usually diversified by distributing the capital between different projects at the same time.
Equity Crowdfunding or Investment Crowdfunding
This is another method inside Crowdfunding that has been working in our country with increasingly better results.
What does Equity Crowdfunding consist of?
This is an investment modality that is used by promoters and entrepreneurs of projects that, in general, have already been launched successfully and need new financial resources to grow or expand: enter into new markets, expand capital to tackle a new project within which it already exists , create a new line of activity, etc.
How does Investment Crowdfunding work?
Like Crowdlending, all operations are carried out digitally through Equity Crowdfunding platforms to which project promoters go in search of investment financing. In return they will have to offer benefits in the form of income or stock (shares in a company). This is to say that the investor who contributes capital to a project through this modality becomes an owner of that company in proportion to how much they have invested.
The Law of All of Nothing
Like with any Crowdfunding project, you must specify the economic goal that you want to achieve, the fixed time period during which the collection will be accepted, the percentage of distribution of shares or stock to be carried out, etc.
Once the deadline is met, if the predetermined objective has not been reached, the investors will be refunded the money and the platform will not charge any commission, which is set based on the amount collected after the campaign.
Real Estate Crowdfunding
Also inside the same sector of activity, there is another version of alternative investment known by the name Real Estate Crowdfunding (investment in brick and mortar or real estate).
Just like with the previous alternative investments, all the management is done digitally through platforms specifically for Real Estate Crowdfunding.
Real Estate Crowdfunding is focused on the purchase and rent of real property.
Do you imagine yourself being able to invest in the construction of a commercial center, perfectly located in one of the main European cities? And in the building of a Hotel in New York? Lower floor retail spaces for offices , renovations of flats on the most central streets, etc.
Well, all of this is already possible thanks to Real Estate Crowdfunding.
The best part?
• Real Estate Crowdfunding in Europe and in most developed countries has already become a reality.
• There are a multitude of projects that are underway currently in which to invest.
• Additionally, it is not necessary to be an accredited investor.
• They accept contributions starting at 5€ depending on the project and the Real Estate Crowdfunding platform.
This is the modality in which Brickfy acts as an innovative search engine for profitable Real Estate Crowdfunding projects in national and international territory.
Advantages of the different types of alternative investments
✔️ Digitalized Investments
This is the main advantage of these types of investments. The platforms through which they occur offer broad digital storefronts where they display projects that are open for financing, as well as all their characteristics and the requirements to participate.
All in real time and in very few clicks.
✔️ Real-time information
Once the portfolio of projects in which we want to invest is chosen, through user passwords we will be able to check the evolution of those projects as well as any possible changes or notifications of interest.
✔️ International Market
Do you want to invest in a project that interests you in any part of the world? This is also possible with alternative investments, whether through the modality of loans, equity, or real estate investments.
✔️ High Profitabilities
They are superior in many cases to those that the classic investment alternatives offer today, especially those of the fixed income market.
✔️ Diversification of Risk
We can choose and manage our own portfolio, participating in different projects at the same time, which helps to diversify the risk of our portfolio.
✔️ They are not exclusive to professional investors
Specifically, the three addressed in this article are not exclusively reserved for institutional investors.
✔️ Contributions starting at 5€
When did investing cost so little money? Until recently the investment in brick was destined only for those with large amounts of capital, but collective investments have allowed this to change and have democratized real estate investments.
If you have been thinking about making the leap to alternative investments, but you have let yourself be carried away by the rumor mill or the lack of information, the question we have to ask you is… Do you dare now?
If so, on Brickfy you will be able to find all the information you need to carry out your investments in Real Estate Crowdfunding with success. And in the same portal, you can see new projects and offers, the type of investment and its characteristics, and much more.